It’s a key to promoting access and reducing health care costs. And it’s a key to advancing public health.

But I’m worried that the market for these products still isn’t established. The ability for these products to penetrate clinical practice, and gain acceptance, is still not firm.

That doesn’t mean that the future doesn’t hold a lot of promise for biosimilars. It just means that the future is uncertain. And the policy and regulatory decisions that we make today are going to have a lot to do with whether we realize the promise for this new category of products. Or if we see the opportunities we once envisioned go unrealized.

We know that biologics are used to treat many serious and life-threatening diseases. They’ve become a mainstay in the treatment of cancer and autoimmune conditions.

They’re also expensive.

While less than 2 percent of Americans use biologics, they represent 40 percent of total spending on prescription drugs.

So, enabling a path to competition for biologics from biosimilars is a key to reducing costs and to facilitating more innovation.

By enabling a path for competition from biosimilars, we also give innovators an added incentive to invest in further research that’ll lead to the discovery of even better drugs that deliver additional benefits for patients.

At the FDA, we’re focused on advancing policies that make the process for developing biosimilars more efficient.

To achieve these goals, I’m pleased to announce today that we’re releasing our Biosimilars Action Plan. This plan is an important piece of the Administration’s bold Blueprint to Lower Drug Prices and demonstrates the progress being made against the deliverables the President laid out.

Our plan is aimed at promoting competition and affordability across the market for biologics and biosimilar products. Before I focus on some of the details, I’d like to talk about some of the broader goals we’re focused on.

At the FDA, we recognize the critical role Congress has given us to make sure the U.S. maintains a robust market for new biologics innovation, while also advancing paths that promote timely biosimilar competition to enhance patient access and reduce costs for patients and our health care system.

Preserving that balance between innovation and competition requires modernizing regulatory requirements to maintain efficient, predictable and science-based pathways for drug review. Our aim is to reduce the time, uncertainty and cost of drug development, while also supporting a competitive market through the efficient approval of lower-cost generic, biosimilar and interchangeable alternatives after the expiration of patents or other statutory exclusivities.

This cycle of market-based innovation and competition has helped make America’s biopharmaceutical industry the leader among our global peers in Asia and Europe.

And, when patients with life-threatening disease look for medical hope, they often look first to American research.

In many respects, America is the world’s medicine chest.

We’ve seen a lot of progress against vexing diseases in recent years. But I believe we’re at an inflection point in medicine. We’re at the brink of an era that’s comparable to the period just after World War II, when we first introduced effective antibiotics. That was a period where we went from temporizing many deadly ailments, to curing them.

And, with the advent of new platforms like gene therapy and more targeted drugs, we’re at a similar period now.

In the long run, these therapies will be disruptive. They’ll not only improve medical care, but also lower healthcare costs. They’ll defray or, in some cases, even eliminate the labor costs associated with chronic, debilitating diseases that can lead to expensive hospital admissions. They’ll help more people escape a trap of long-term care in settings that can rob them of their independence and dignity and reduce their economic productivity.

Those costs may be less visible than a drug’s sticker price. But they’re an even greater drain on our nation’s finances and productivity. Yet we know that these cost savings tomorrow do not pay health care bills today. So we must learn how to deliver both cutting-edge innovation and affordable access to new treatments in the present time, and not decades after a product is introduced.

That brings me back to biosimilars.

Biologics represent 70 percent of the growth in drug spending from 2010 to 2015. And they’re forecasted to be the fastest growing segment of drug spending in the coming years.

To make sure that the next generation of breakthroughs remains affordable, it requires vibrant competition from biosimilars. But it also means that we must consider new payment approaches. Models that allow us to take advantage of the competition that biosimilars offer.

Our current payment system, which reimburses drugs based on their average sales price, was designed in a single-source world. It was a market of biologics where there was typically only one drug in a category. And there wasn’t a lot of therapeutic variety or competition.

At the time, there was only one EGFR inhibitor on the market, and just one VEG-F inhibitor. I was there when this system was designed and implemented. And I can tell you many of us didn’t envision a world where there’d be so much competition in these therapeutic categories.

So a system was designed that accepted the fact that government programs, like Medicare, would be price takers.

We didn’t have the advantage of drug competition to enable the development of formularies, bidding and market-based negotiations like we have under Part D prescription drug plans.

So the system we designed—using the average sales price as a benchmark for reimbursement—was designed to help make sure that drug makers wouldn’t be able to take big price increases once the drugs reached the market. But it wasn’t a system designed to take advantage of price competition. Because we didn’t foresee that there would be multiple drugs in these different categories.

That’s not the case anymore.

Now most of these biologics categories are highly competitive, with lots of different products aimed at the same target. Yet the current payment system doesn’t take full advantage of all this therapeutic competition.

And so we need to adopt a different approach to paying for these drugs. An ideal system would reimburse biologics in a competitively bid scheme, where we could take full advantage of the multi-source competition.

Even without these policy changes, right now savings estimates from expected biosimilar competition are large. They range from $54 billion from 2017 to 2026 according to a study by RAND , to as much as $250 billion from 2014 to 2024 from just 11 biosimilars expected to be approved and marketed according to a survey by Express Scripts.

The assumptions and timelines behind those estimates vary. But the fact is that the biosimilar market isn’t as competitive as many observers hoped it would be after Congress first passed legislation creating the pathway.

And so far, the real savings has been just a fraction of even the most conservative initial estimates.

You don’t have to look far to understand why.

While the FDA has approved 11 biosimilars through 2018, only three are now marketed in the U.S.

Competition is, for the most part, anemic.

It’s anemic because consolidation across the supply chain has made it more attractive for manufacturers, Pharmacy Benefit Managers, Group Purchasing Organizations and distributors to split monopoly profits through lucrative volume-based rebates on reference biologics—or on bundles of biologics and other products—rather than embrace biosimilar competition and lower prices.

It’s anemic because litigation has delayed market access for biosimilar products that are, or shortly will be, available in markets outside the U.S. several years before they’ll be available to patients here. These delays can come with enormous costs for patients and payors.

Let me give you one measure of those costs.

At the FDA, we did an analysis of biosimilar competition across all Organisation for Economic Co-operation and Development (OECD) markets. We looked at what would have happened if all the biosimilars that the FDA approved in the U.S. were successfully marketed here in a timely fashion.

We’ll release the full details on this analysis soon. But I want to give you a sense today of what we found.

To measure the potential impact of this biosimilar competition, we assumed that the savings achieved in the U.S., in terms of price discounts, would have been on par with the experience enjoyed in the other OECD nations.

Based on these assumptions, our analysis showed that if Americans had the opportunity to purchase successfully marketed, FDA-approved biosimilar prescription drugs, they could have saved more than $4.5 billion in 2017.

These are large savings. They’re about half of the nearly $9 billion in total savings in 2017 from all of the 2017 generic drug approvals, according to earlier FDA work.

This analysis assumes that all of the biosimilars that the FDA approved were successfully marketed.

But we know that’s not the case. We know that litigation blocked a lot of these launches. Yet our study found that entry of a single biosimilar product in non-U.S. OECD markets lowers prices relative to the reference product by 30 percent; markets with three to four biosimilar entrants have prices 35 to 43 percent lower than their reference biologics.

Our savings estimate doesn’t include additional potential savings from biosimilars approved in 2018. Estimated savings would therefore be significantly greater than $4.5 billion if these additional FDA-approved biosimilars were also marketed at or near the time of their approval.

Biologic manufacturers have a right to defend their legitimate intellectual property interests. And we want them to continue to offer the benefits of improved versions of originator biologics. These benefits might include biologics that target disease in new ways, such as delivering a toxic payload directly to cancer cells, or biologics that target multiple targets of disease at the same time.

The benefits might also be new formulations of established drugs that can improve delivery options. For instance, shifting from health care provider-administered infusions to products that a patient can self-administer at home, and therefore need less active physician monitoring.

Those types of innovations can deliver real economic and public health advantages. And the competition from biosimilars might drive innovators to invest in these new opportunities. That’s how biosimilars can help promote new innovation, just like with traditional generic drugs.

This is how the advent of biosimilar entry should also inspire entrepreneurs to invest in new technologies and develop new monopolies around better innovations.

But rebating schemes or patent thickets that are purely designed to deter the entry of approved biosimilars are spoiling this sort of competition. Long-dated contracts are another toxin. The branded drug makers thwart competition by dangling big rebates to lock up payors in multi-year contracts right on the eve of biosimilar entry.

We’re also concerned that volume-based rebates may encourage dysfunctional clinical treatment pathways. We’ve heard from multiple sources that some payors are requiring step-therapy or prior authorization on the reference biologic before patients can access a biosimilar. We see no clinical rationale for these practices, since a biosimilar must demonstrate, among other things, that it has no clinically meaningful differences from the reference product as a part of demonstrating biosimilarity.

The branded drug industry didn’t build its success by being business naïve. They are smart competitors.

But that doesn’t mean we need to embrace all of these business tactics, or agree that they’re appropriate.

Some of these tactics should be unacceptable to every member of the drug supply chain.

Biosimilars may be relatively new, but manufacturers’ tactics to delay and frustrate Congress’ legislative intent to promote competition in drug pricing date back decades.

These tactics were first honed in battles between branded companies and manufacturers of small molecule generics after the passage of the Hatch Waxman Act in 1984.

And these battles played out for a time. But ultimately competition prevailed, and so did the benefits of generics.

In 1983, generic drugs accounted for only 13 percent of U.S. prescriptions. Today, in 2018, it’s 90 percent. And generics can cost 75 to 90 percent less than their branded competitors.

Robust competition has led to generic drug prices that are often less expensive here in the U.S. than in other developed markets in Europe and Asia. The Association for Accessible Medicines, a trade group that represents generic drug makers, estimates that generic medicines have saved the U.S. well over $1 trillion over the last decade.

The generics market that we see today, while not perfect, is robust in most respects. But it took about two decades to develop. It took a long time for providers to grow comfortable prescribing generics and patients to be confident in taking them. It took a long time to work through legal tactics that were put in the way of competition. It took a long time for the coverage systems to be changed to take brisk advantage of generic entry.

Sometimes it feels as if we’re seeing the biosimilars version of “Groundhog Day,” with brand drug makers replaying many of the same tactics, and all of us being too susceptible to many of the same misconceptions about biosimilars’ safety and efficacy relative to originator biologics.

We’re falling into some of the same doubts and policy constraints that were used to deter competition from generics in the years after the Hatch Waxman Act.

But we’re not going to play regulatory whack-a-mole with companies trying to unfairly delay or derail the entry of biosimilar competitors. We’re not going to wait a decade or more for robust biosimilar competition to emerge.

Expanding access to affordable biosimilars, and slowing the rise of health care inflation, is an even more critical issue today than it was in 1984. The higher costs, and longer timelines, required to develop biosimilars relative to generics means that these delaying tactics can make it uneconomical for biosimilar sponsors to postpone entry for extended periods of time. I’m worried that the biosimilar manufacturers may pull out of these endeavors altogether if the brand drug makers are able to lock up markets even in cases where there’s a fully interchangeable competitor.

Ultimately, this behavior is also putting innovative drug development at risk by eroding public confidence in market-based pricing mechanisms. Too many people now are shooting at the branded drug makers. And the shrapnel isn’t just going to tear apart the gaming tactics that we might agree are gratuitous and ill conceived.

I’m worried that the shrapnel could also fray the fragile market-based rewards that support new innovation.

Our Biosimilars Action Plan applies many of the lessons learned from our experience with generic drugs to accelerate biosimilar competition with four key strategies.

First, improving the efficiency of the biosimilar and interchangeable product development and approval process.

Second, maximizing scientific and regulatory clarity for the biosimilar product development community.

And fourth, supporting market competition by reducing gaming of FDA requirements or other attempts to unfairly delay market competition to follow-on products.

I don’t want to get into the details of the entire plan in my remarks today. We’ve issued a plan that lays out all of the discrete elements of our approach.

But I want to highlight a few key actions that we’re taking.

I believe some of these actions can be transformative for sponsors’ ability to bring high quality biosimilars to market.

As part of this effort, the FDA is seeking to strengthen its partnerships with regulatory authorities in Europe, Japan and Canada. Such partnerships can enable greater efficiency in developing safe and effective biosimilars.

For example, we’re actively exploring whether data sharing agreements could give us better insights into biosimilars’ real-world safety and efficacy and, in some circumstances, facilitate the increased use of non-U.S.-licensed comparator products in certain studies to support an application under Section 351(k).

We know that when those developing biosimilars use biologics sourced ex-U.S. as their comparator product, it can lower the cost of clinical studies since many of these products can be procured more easily, and cheaply, in European and Asian markets.

We’ll also be updating the Purple Book and evaluate how we can incorporate additional information into that resource to give product developers more transparency.

And we’re also taking new steps to make the biosimilar development process more efficient.

Today, the FDA issued its final guidance on biosimilar labeling. The FDA wants to make sure that biosimilar products have labeling that allows health care practitioners to make informed prescribing decisions for their patients. Our guidance gives recommendations to applicants on how to prepare this labeling for review by the FDA.

We’re also going to be updating guidance to provide additional clarity on how biosimilar manufacturers can carve out indications from their labels where a branded drug maker might still maintain some IP. And we’re going to describe how these indications can be efficiently added into a biosimilar label once that IP on the branded alternative has lapsed.

We are also currently developing and implementing new FDA review tools, such as standardized review templates, that are tailored to applications for biosimilar and interchangeable products. We’ve already adopted similar approaches when it comes to generic drugs. These templates will improve the efficiency of the FDA’s review.

We’re also developing an index of biosimilars’ critical quality attributes relative to their reference products.

Such an index can allow sponsors to better understand how the FDA evaluates data from comparative analytical studies performed to support a demonstration of biosimilarity, and how to use suitable analytical methods.

And we’re going to be taking new steps to challenge some of the gaming tactics I talked about earlier. This includes new efforts to coordinate with the Federal Trade Commission (FTC) to address anti-competitive behavior.

We look forward to participating in additional forums with the FTC to jointly identify ways that we can deter anticompetitive behavior in this space. Stay tuned.

As part of our Drug Competition Action Plan, we made it a priority to ensure that Risk Evaluation and Mitigation Strategies (REMS) safety programs maintain their role in serving public health and aren’t used to delay competition from entering the market by refusing to sell the samples necessary for developing generic drugs. We’ll apply the same principles to our Biosimilars Action Plan.

One final important note that I’d like to stress from our experience with generics: the FDA can’t do it alone.

Competition requires all of us to shine a light on the anti-competitive impact of tying rebates and bundling biologics with other products to protect biologics’ market share.

And it requires us to educate providers and patients about biosimilars, and why people should have confidence in the safety and effectiveness of these FDA-approved products.

Without those actions, our collective vision of a pathway for more affordable biosimilar products will be frustrated.

Frankly, I don’t expect that to happen.

There’s active work under way on bold reforms, like shifting biologics from Medicare’s Part B scheme into a competitively bid system like Part D, where we can take full advantage of price and therapeutic competition.

These types of approaches can delink physician reimbursement from drug prices and inject more competition into the market, while increasing the incentives to create the next great innovation that’s going to advance human health.

And our new plan is aimed at laying the groundwork for these and other reforms, to make sure we’re realizing these public health opportunities. Thank you.

The FDA, an agency within the U.S. Department of Health and Human Services, protects the public health by assuring the safety, effectiveness, and security of human and veterinary drugs, vaccines and other biological products for human use, and medical devices. The agency also is responsible for the safety and security of our nation’s food supply, cosmetics, dietary supplements, products that give off electronic radiation, and for regulating tobacco products.